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AB-2045 Insurance.(2017-2018)

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Date Published: 08/28/2018 09:00 PM
AB2045:v94#DOCUMENT

Assembly Bill No. 2045
CHAPTER 231

An act to amend Sections 42, 109, 110, 122, 679.70, 1307, 1371, 1390, 1668, 1668.5, 1669, 1753, 4052, 10168.45, 10270, 10270.6, and 11401 of, and to repeal Section 12147 of, the Insurance Code, relating to insurance.

[ Approved by Governor  August 28, 2018. Filed with Secretary of State  August 28, 2018. ]

LEGISLATIVE COUNSEL'S DIGEST


AB 2045, Committee on Insurance. Insurance.
(1) Existing law governs annuities and, for those insurance contracts that provide cash surrender benefits, prescribes the cash surrender benefit available prior to maturity. Existing law authorizes an insurer to require a contract owner to complete an administrative form as part of the surrender process and requires the insurer to provide the administrative form to the contract owner within two business days of the request.
This bill would instead require the insurer to send or mail the administrative form to the contract owner within two business days of the request.
(2) Existing law exempts from requirements for providing insurance set forth in the Insurance Code firefighters’, police officers’, and peace officers’ benefit and relief associations that comply with specified criteria, including, among other things, a requirement that the membership consist solely of peace officers, members of police or fire departments, and emergency medical personnel employed by fire departments, as specified. Existing law prohibits these associations from operating or doing business in the state without a certificate of authority.
This bill would require an association to renew its certificate of authority on or before July 1, 2019, and every 5 years thereafter. The bill would authorize the Insurance Commissioner to revoke an association’s certificate of authority under specified circumstances after mailing written notice to the association.
(3) Existing law generally regulates motor clubs and prohibits a person from rendering motor club service in this state without first obtaining from the Insurance Commissioner a certificate of authority to act as a motor club.
This bill would delete the definition of bail bond services in provisions relating to motor clubs.
(4) Existing law generally provides for the regulation of insurers by the Department of Insurance pursuant to provisions set forth in the Insurance Code.
This bill would make various technical, nonsubstantive amendments to provisions relating to insurance to, among other things, provide for gender neutral language and updated cross-references.
Vote: MAJORITY   Appropriation: NO   Fiscal Committee: YES   Local Program: NO  

The people of the State of California do enact as follows:


SECTION 1.

 Section 42 of the Insurance Code is amended to read:

42.
 The designation of insurance coverage as “group” in any code or law of this state other than this code does not authorize its representation as a group coverage or as a group policy, certificate, or contract by any person licensed or certificated by the commissioner unless the policy providing the coverage is defined as group insurance by a specific provision of this code or of the laws of the state in which the policy, certificate, or contract is issued. This section shall apply only to life, disability, and workers’ compensation insurance.

SEC. 2.

 Section 109 of the Insurance Code is amended to read:

109.
 Workers’ compensation insurance includes insurance against loss from liability imposed by law upon employers to compensate employees and their dependents for injury sustained by the employees arising out of and in the course of the employment, irrespective of negligence or of the fault of either party.

SEC. 3.

 Section 110 of the Insurance Code is amended to read:

110.
 Common carrier liability insurance includes insurance against loss resulting from liability of a common carrier for accident or injury, fatal or nonfatal, to any person but does not include liability or workers’ compensation insurance.

SEC. 4.

 Section 122 of the Insurance Code is amended to read:

122.
 (a) An insurer admitted for all the classes of insurance defined in Sections 102, 107, 108, 112, and 120 is authorized, in addition to the underwriting powers granted by such classes, to include any and all insurance described in paragraph (b) in a policy which contains fire coverage written on a form complying with either Section 2070 or 2071 and which provides insurance covering only noncommercial risks and covering either residence properties (not more extensive than a four-family dwelling) and appurtenances, or the contents thereof other than merchandise, or both.
(b) Such insurance is any or all insurance against all risks of physical loss of, damage to, or personal liability (except workers’ compensation) for injury to person or damage to property incident to, any or all of the following:
(1) The location described and property covered by the fire insurance policy as described in subdivision (a),
(2) Personal effects,
(3) Boats not over 16 feet in length (including furnishings, equipment, outboard motors, and trailers); provided the physical loss or damage coverage does not exceed five hundred dollars ($500),
(4) Personal property intended primarily for residential or recreational use, (excluding boats except as provided above),
(5) Farm implements or self-propelled vehicles, excluding automobiles and aircraft, and,
(6) Horses, including accouterments and vehicles or implements to be drawn thereby.

SEC. 5.

 Section 679.70 of the Insurance Code is amended to read:

679.70.
 This chapter shall apply to policies of insurance, other than automobile insurance and workers’ compensation insurance, on risks located or resident in this state which are issued and take effect or which are renewed after the effective date of this chapter and which insure any of the following contingencies:
(a) Loss of or damage to real property which is used predominantly for residential purposes.
(b) Loss of or damage to personal property in which natural persons resident in specifically described real property of the kind described in subdivision (a) have an insurable interest.
(c) Legal liability of a natural person or persons for loss of, damage to, or injury to, persons or property.

SEC. 6.

 Section 1307 of the Insurance Code is amended to read:

1307.
 The power of attorney and contracts made thereunder may:
(a) Provide for the right of substitution of attorney and revocation of the contract or power.
(b) Impose such restrictions upon the exercise of the power as are agreed upon by the subscribers.
(c) Provide for and limit the maximum amount to be paid by subscribers, except that contracts of exchanges writing either liability or workers’ compensation insurance shall be subject to the provisions of Article 6 of this chapter.
(d) Provide for the exercise of any right reserved to the subscribers directly or through a board or other body.

SEC. 7.

 Section 1371 of the Insurance Code is amended to read:

1371.
 If an exchange does either liability or workers’ compensation insurance, it shall at all times maintain assets in a sum sufficient to discharge all liabilities and to provide a surplus over all liabilities of one hundred thousand dollars ($100,000).
An exchange subject to the provisions of this section is also subject to the provisions of Sections 1370.2, 1370.4, and 1370.8.

SEC. 8.

 Section 1390 of the Insurance Code is amended to read:

1390.
 The provisions of this article shall apply only to exchanges writing liability, common carrier liability, or workers’ compensation insurance, except that any exchange may apply for and receive the certificate provided for by Section 1401.

SEC. 9.

 Section 1668 of the Insurance Code is amended to read:

1668.
 The commissioner may deny an application for any license issued pursuant to this chapter if:
(a) The applicant is not properly qualified to perform the duties of a person holding the license applied for;
(b) The granting of the license will be against public interest;
(c) The applicant does not intend actively and in good faith to carry on as a business with the general public the transactions which would be permitted by the issuance of the license applied for;
(d) The applicant is not of good business reputation;
(e) The applicant is lacking in integrity;
(f) The applicant has been refused a professional, occupational, or vocational license or had such a license suspended or revoked by any licensing authority for reasons that should preclude the granting of the license applied for;
(g) The applicant seeks the license for the purpose of avoiding or preventing the operation or enforcement of the insurance laws of this state;
(h) The applicant has knowingly or willfully made a misstatement in an application to the commissioner for a license, or in a document filed in support of such an application, or has made a false statement in testimony given under oath before the commissioner or any other person acting in his or her stead;
(i) The applicant has previously engaged in a fraudulent practice or act or has conducted any business in a dishonest manner;
(j) The applicant has shown incompetency or untrustworthiness in the conduct of any business, or has by commission of a wrongful act or practice in the course of any business exposed the public or those dealing with him or her to the danger of loss;
(k) The applicant has knowingly misrepresented the terms or effect of an insurance policy or contract;
(l) The applicant has failed to perform a duty expressly enjoined upon him or her by a provision of this code or has committed an act expressly forbidden by such a provision;
(m) The applicant has been convicted of:
(1) A felony;
(2) A misdemeanor denounced by this code or other laws regulating insurance; or
(3) A public offense having as one of its necessary elements a fraudulent act or an act of dishonesty in acceptance, custody, or payment of money or property;
(n) The applicant has aided or abetted any person in an act or omission which would constitute grounds for the suspension, revocation, or refusal of a license or certificate issued under this code to the person aided or abetted;
(o) The applicant has permitted any person in his or her employ to violate any provision of this code; or
(p) The applicant has violated any provision of law relating to conduct of business which could lawfully be done only under authority conferred by such license.
(q) The applicant has submitted to the commissioner a false or fraudulent certificate pursuant to subdivision (d) of Section 1749.5.
A judgment, plea, or verdict of guilty, or a plea of nolo contendere is deemed to be a conviction within the meaning of this section.

SEC. 10.

 Section 1668.5 of the Insurance Code is amended to read:

1668.5.
 (a) The commissioner may deny an application for any license issued pursuant to this chapter, and may suspend or revoke the permanent license of any organization licensed pursuant to this chapter as authorized by Section 1738, if the applicant or holder of the permanent license is an organization and a controlling person of the organization is any of the following:
(1) The controlling person has previously engaged in a fraudulent practice or act or has conducted any business in a dishonest manner.
(2) The controlling person has shown incompetency or untrustworthiness in the conduct of any business, or has by commission of a wrongful act or practice in the course of any business exposed the public or those dealing with him or her to the danger of loss.
(3) The controlling person has knowingly misrepresented the terms or effect of an insurance policy or contract.
(4) The controlling person has failed to perform a duty expressly enjoined upon him or her by a provision of this code or has committed an act expressly forbidden by a provision of this code.
(5) The controlling person has been convicted of any of the following:
(A) A felony.
(B) A misdemeanor denounced by this code or other laws regulating insurance.
(C) A public offense having as one of its necessary elements a fraudulent act or an act of dishonesty in acceptance, custody, or payment of money or property.
A judgment, plea, or verdict of guilty, or a plea of nolo contendere is deemed to be a conviction within the meaning of this section.
(6) The controlling person has aided or abetted any person in an act or omission that would constitute grounds for the suspension, revocation, or refusal of a license or certificate issued under this code to the person aided or abetted.
(7) The controlling person has permitted any person in his or her employ to violate any provision of this code.
(8) The controlling person has violated any provision of law relating to conduct of business that could lawfully be done only under authority conferred by a license under this chapter.
(b) As used in this section, “controlling person” means a person who possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of the organization, whether through the ownership of voting securities, by contract other than a commercial contract for goods or nonmanagement services, or otherwise, including, but not limited to, power that is the result of an official position with or corporate office held by the person. Control shall be presumed to exist if any person, directly or indirectly, owns, controls, holds with the power to vote, or holds proxies representing, more than 10 percent of the voting securities of the organization. This presumption may be rebutted by a showing that control does not exist in fact. The commissioner may, after furnishing all persons in interest notice and opportunity to be heard, determine that control exists in fact, notwithstanding the absence of a presumption to that effect.

SEC. 11.

 Section 1669 of the Insurance Code is amended to read:

1669.
 The commissioner may, without hearing, deny an application if the applicant has done one or more of the following:
(a) (1) Been convicted of a felony.
(2) Been convicted of a misdemeanor denounced by this code or by other laws regulating insurance.
(3) A judgment, plea, or verdict of guilty, or a plea of nolo contendere is deemed to be a conviction within the meaning of this subdivision.
(b) Had a previous application for a professional, occupational, or vocational license denied for cause by any licensing authority, within five years of the date of the filing of the application to be acted upon, on grounds that should preclude the granting of a license by the commissioner under this chapter.
(c) Had a previously issued professional, occupational, or vocational license suspended or revoked for cause by any licensing authority, within five years of the date of the filing of the application to be acted upon, on grounds that should preclude the granting of a license by the commissioner under this chapter.
In the event the commissioner issues an order based on a plea that does not at any time result in a judgment of conviction, the commissioner shall vacate the order upon petition by the applicant.

SEC. 12.

 Section 1753 of the Insurance Code is amended to read:

1753.
 As used in this article, the following terms have the following meanings:
(a) “Limited lines travel insurance agent” means an insurer designee that is licensed to transact travel insurance, as defined in subdivision (b).
(b) “Transact” means, for the purposes of this article, the following activities when engaged in by a travel retailer:
(1) Offering and disseminating information to a prospective or current policyholder on behalf of a limited lines travel insurance agent, including brochures, buyer guides, descriptions of coverage, and price.
(2) Referring specific questions regarding coverage features and benefits from a prospective or current policyholder to a limited lines travel insurance agent.
(3) Disseminating and processing applications for coverage, coverage selection forms, or other similar forms in response to a request from a prospective or current policyholder.
(4) Collecting premiums from a prospective or current policyholder on behalf of a limited lines travel insurance agent.
(5) Receiving and recording information from a policyholder to share with a limited lines travel insurance agent.
(c) (1) “Travel insurance” means insurance coverage for personal risks incidental to planned travel, including one or more of the following:
(A) Interruption or cancellation of a trip or event.
(B) Loss of baggage or personal effects.
(C) Damages to accommodations or rental vehicles.
(D) Sickness, accident, disability, or death occurring during travel.
(2) Travel insurance does not include major medical plans, which provide comprehensive medical protection for travelers with trips lasting six months or longer, including, for example, those working overseas as an expatriate or military personnel being deployed.
(3) Travel insurance does not include damage waiver contracts, as defined in subdivision (g) of Section 1939.01 of the Civil Code. The phrase “damage waiver” or “collision damage waiver” cannot be used to describe travel insurance coverage, but the insurance contract may otherwise refer to “damage waiver” or “collision damage waiver” provided by a rental company, as defined in subdivision (a) of Section 1939.01 of the Civil Code.
(d) “Travel retailer” means a business organization that makes, arranges, or offers travel services and may offer and disseminate travel insurance as a service to its customers on behalf of and under the direction of a limited lines travel insurance agent.

SEC. 13.

 Section 4052 of the Insurance Code is amended to read:

4052.
 The payment of any such dividends on a workers’ compensation policy shall be subject to the provisions of Section 11738 and for that purpose a mutual policy shall be considered to be a participating policy.

SEC. 14.

 Section 10168.45 of the Insurance Code is amended to read:

10168.45.
 (a) (1) For an individual annuity contract subject to this article that is surrendered by the contract owner, the insurer shall return to the owner all moneys due in relation to that contract as expeditiously as possible but not later than 45 days from the date the surrender is effective as provided in subdivision (b).
(2) An insurer may defer payment of cash surrender value for up to six months if the approval described in subdivision (b) of Section 10168.1 has been received by the insurer.
(b) (1) (A) A surrender of a contract is effective on the date the request is received if the request is made to the insurer, or servicing agent authorized by the insurer in writing to receive requests for surrender on the insurer’s behalf, and contains the elements specified by the insurer in the contract.
(B) The effective date of the surrender of a contract may be up to 45 days after the request for surrender is received if it is permitted by the contract and requested by the contract owner.
(2) The insurer may require the request for surrender to be in writing.
(3) The elements the insurer may require as part of the request for surrender are limited to the following:
(A) A statement that makes it clear that the contract owner intends to surrender, in whole or in part, the contract in question.
(B) The contract number of the contract to be surrendered.
(C) The name, address, and telephone number of the contract owner on the contract to be surrendered.
(D) A clear method of delivery and payee instructions for payment of the surrender value.
(E) For partial surrender, the withdrawal amount, including requested beginning date, frequency, and maximum annual withdrawal amount, and instructions on subaccount withdrawals.
(F) Instructions for tax withholding.
(G) The signature of the owner of the contract, which may be either a wet signature or an electronic signature at the insurer’s discretion, and if required by the contract or by a legally binding document that the insurer has actual notice of, the signature of a collateral assignee, irrevocable beneficiary, or other person having an interest in the contract through the legally binding document.
(H) Either the contract itself, or, in lieu of the contract, a statement that the contract has been lost or destroyed.
(4) The insurer may require the contract owner to complete an administrative form as part of the surrender process. The insurer’s administrative form may only request information required to complete the surrender transaction, as set forth in paragraph (3). An administrative form shall be sent or mailed to the contract owner within two business days of the request, and shall be available for the contract owner to access on the insurer’s Internet Web site if the contract owner accesses his or her account information through the insurer’s Internet Web site. The insurer’s requirement to complete an administrative form shall not further the effective date of the surrender or extend the 45-day period in which the surrender is required to be processed.
(A) The administrative form shall be designed to provide the insurer with the information needed to complete the surrender transaction consistent with the contract owner’s request.
(B) If the insurer requires an administrative form and the contract owner completes and submits that form within 14 days of the surrender request, the insurer shall return all moneys due as expeditiously as possible but not later than 30 days from the effective date of the surrender.
(c) When the contract owner requests information about surrendering a contract from the insurer or servicing agent, the insurer or servicing agent shall provide, upon request, as expeditiously as possible, a written notice setting forth either the requirements of this section or the insurer’s requirements.
(d) A contract subject to this section shall do either of the following:
(1) Include language, which may be included by endorsement, setting forth the permitted requirements for surrender described in this section. Alternatively, if the insurer requires only some of the elements permitted in paragraph (3) of subdivision (b) for a surrender request, the contract language may exclude any of the elements in paragraph (3) of subdivision (b) that the insurer does not require to process the surrender.
(2) Be accompanied by a notice setting forth the permitted requirements for a surrender described in this section. Alternatively, if the insurer requires only some of the elements permitted in paragraph (3) of subdivision (b) for a surrender request, the notice may exclude any of the elements in paragraph (3) of subdivision (b) that the insurer does not require to process the surrender.
(e) (1) For a written request and for purposes of this section, “received” means the first day that the written notice is delivered to the address of the insurer or servicing agent authorized by the insurer in writing to receive requests for surrender on the insurer’s behalf.
(2) (A) An insurer or servicing agent shall maintain a procedure for ensuring that requests for surrender are logged or stamped on the date received and not on a later date due to the insurer’s or servicing agent’s internal routing or delivery procedures.
(B) If the procedure required pursuant to subparagraph (A) is not maintained, it shall be conclusively presumed that a request was received on the earliest of the following:
(i) The delivery date shown on an express, certified, or registered mail receipt form of the United States Postal Service or by a commercial carrier.
(ii) Two business days after the request was postmarked by the United States Postal Service.
(iii) One business day before the date stamped received by the insurer or servicing agent.
(C) For purposes of this paragraph, “business day” has the meaning set forth in subdivision (b) of Section 1215.
(D) Postmarks generated by postage meters not located at an office of the United States Postal Service are to be disregarded.
(f) (1) This section does not alter a contractual provision governing calculation of cash or surrender or other values, unless that contractual provision applies a valuation date other than the effective date of surrender described in subdivision (b) to the calculation of cash or surrender or other values.
(2) The effective date established by subdivision (b) is intended to establish a date certain on which a contract owner may rely in determining when the 45-day period specified in subdivision (a) begins to run and a date certain for the insurer to use for the valuation of the contract.
(3) Notwithstanding paragraph (3) of subdivision (b), an insurer may request information that is reasonably necessary to process the surrender in addition to that listed in subdivision (b). An insurer’s request for additional information does not delay an effective date established by a contract owner’s compliance with subdivision (b).
(4) An insurer may request a signature guarantee if there is reason to believe a fraudulent situation may occur.
(g) This section shall only apply to contracts issued on or after January 1, 2019.

SEC. 15.

 Section 10270 of the Insurance Code is amended to read:

10270.
 (a) This chapter shall not apply to workers’ compensation insurance, any policy of liability insurance with or without supplementary coverage, or any policy or contract of reinsurance.
(b) This chapter shall apply to selected group disability insurance as defined in Section 10270.97, except insofar as it is exempted from Section 10401.
(c) This chapter shall apply to each of the types of insurance enumerated in this subdivision that insure more than one person, except to the extent that the type of insurance may be exempted from compliance with particular portions of this chapter by the provisions of this chapter relating to that type of insurance.
The types of insurance that insure more than one person and that are hereby exempted from subdivision (c) of Section 10320 (but family expense disability insurance only to the extent therein provided), and Section 10401 (but only to the extent in this chapter provided) are:
(1) Blanket insurance, as defined in subdivision (a) of Section 10270.2.
(2) Tuition refund insurance, as defined in Section 10270.1.
(3) Group disability insurance, as defined in Sections 10270.5, 10270.505, and 10270.57.
(4) Family expense disability insurance, as defined in Section 10270.7.
(5) Unemployment compensation disability insurance, as defined in paragraph (6) of subdivision (a) of Section 10270.2.

SEC. 16.

 Section 10270.6 of the Insurance Code is amended to read:

10270.6.
 Every group disability master policy shall contain the following provisions:
(a) A provision that the policy, the application of the policyholder, and the individual applications, if any, of the individuals insured shall constitute the entire contract between the parties, and that all statements made by the policyholder, or by the individuals insured shall, in the absence of fraud, be deemed representations and not warranties, and that no such statement shall be used in defense to a claim under the policy, unless it is contained in a written application;
(b) A provision that the insurer will issue to the policyholder for delivery to the individuals insured under such policy, an individual certificate setting forth a statement as to the insurance protection to which he or she is entitled and to whom payable;
(c) A provision that to the group or class thereof originally insured shall be added from time to time all new employees, members, or pupils of the policyholder eligible to and applying for insurance in such group or class;
(d) A statement that such policy is not in lieu of and does not affect any requirement for coverage by workers’ compensation insurance.

SEC. 17.

 Section 11401 of the Insurance Code is amended to read:

11401.
 (a) An association shall not operate or do business in this state without a certificate of authority. The commissioner shall issue a certificate of authority to any association unless he or she determines, after examination, that it does not comply with the provisions of this chapter. The filing fee for the application for the certificate of authority shall be one thousand four hundred ten dollars ($1,410).
(b) (1) On or before July 1, 2019, every association shall renew its certificate of authority.
(2)  After July 1, 2019, an association shall renew its certificate of authority every five years from the date it previously renewed its certificate of authority.
(c) (1) The commissioner may revoke the certificate of authority for an association that failed to renew its certificate of authority in compliance with subdivision (b), after giving reasonable written notice mailed to the last address of the association registered with the department.
(2) The commissioner may revoke the certificate of authority for an association that has a dissolved, suspended, or otherwise inactive status according to the records of the Secretary of State, after giving reasonable written notice mailed to the last address of the association registered with the department.
(3) To obtain a reissue of a certificate of authority revoked pursuant to this subdivision, an association shall apply to the commissioner pursuant to subdivision (a).

SEC. 18.

 Section 12147 of the Insurance Code is repealed.